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UK's CDC Group invests $16 million in Chennai-based MFI Equitas

The Economic Times:  December 27, 2013

New Delhi: UK-based CDC Group has invested $16 million (Rs 99.6 crore) in Chennai-based microfinanceinstitution Equitas, the development finance institution announced on Thursday.

The equity investment will help Equitas broaden its financial services offerings, and also reach a customer base of 5.5 million, up from the current 1.5 million.

"Equitas has shown remarkable growth in South India and CDC's investment provides the capital for the company to further expand through new branches in other parts of the country, offering new services to thousands of financially excluded customers in India," said Maria Largey, microfinance investment manager at CDC.

The investment, which is part of a financing package of $36 million (Rs 224.1 crore) that includes additional funding from Netherlands-based DFI FMO and other investors, will also be used by Equitas to boost its loan portfolio to $2billion (Rs 12,450 crore), up from its current $235 million (Rs 1,462.9 crore), and grow its network of branches from 350 at present to 825 in 2018.

The microfinance institution is currently present in eight states, including Tamil Nadu, Maharashtra and Gujarat, among others, and in the union territory of Pondicherry.

" We value this investment by a marquee investor like CDC and reinforcement of support by our existing investors as we seek to make Equitas, a robust and diversified NBFC catering to segments of society not catered to by the mainstream financial markets," said PN Vasudevan, managing director of Equitas.

The microfinance institution has also started operating in the area of affordable housing through Equitas Housing Finance and used commercial vehicle financing through Equitas Finance. Both organisations are part of the Equitas group into which CDC is providing equity

The latest transaction is CDC's first direct investment in a microfinance institution, since the British DFI launched its new investment strategy last year, which allows it to make direct debt and equity investments. The new investment blueprint will also see it continue committing capital to third party funds.

In September, it committed $25 million (Rs 155.6 crore) in emerging markets-focused impact investment firm LeapFrog Group's second fund, which will be used to invest in ventures, largely based in Africa and South Asia.

CDC has a microfinance portfolio (through its funds investment) valued at $160 million (Rs 996 crore), with more than a third of it in Indian MFIs.

"Despite the impressive growth in the microfinance sector during the last five years, there remains considerable, unmet demand in the market for basic financial services," Largey said.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.